Winn-Dixie CEO confident in outlook

By Michael Johnsen

JACKSONVILLE, Fla. — Winn-Dixie president, chairman and CEO Peter Lynch expressed confidence in the grocer as it heads into its fourth quarter, maintaining that the grocer's estimated adjusted EBITDA will come in at the lower end of the $100 million to $130 million range for fiscal 2011, a 52-week period ending June 29, in light of relatively flat third-quarter results.

So far, the fourth quarter is looking especially positive, Lynch said. “[Identical-store] sales are low single-digit, and the performance is strong,” he told analysts Tuesday morning.

Rising gas prices may prove to be a double-edged sword for the Southeastern supermarket, however, especially if high fuel costs impact Florida’s tourism industry coming into the peak season of June through August. “What we’re seeing in tourism in Florida is a lift of about 5% versus last year,” Lynch said. That lift looks sustainable, Lynch added, as Florida tourism has been up over the two most recent quarters and personal income of Floridians is up some 3.4%. “We’re starting to see good signs.”

But any deviation from that growth could have a significant impact on Florida residents, as tourism is a significant factor in the health of the state’s economy. “The economy in Florida still lags behind the rest of the country with unemployment higher than the national average [11.1% vs. 9%],” Lynch said.

Winn-Dixie’s recently launched Fuelperks! program, where members can achieve savings of between 50 cents and $1 per gallon, should help the grocer capture more trips as gas prices rise. That and an increased emphasis on just-in-time meal solutions have Winn-Dixie positioned well against rising energy costs.

“Fuelperks! is evolving our card into a loyalty instrument,” Lynch said, especially as Winn-Dixie seeks to expand its partnerships with local gas stations in honoring Fuelperks! savings. “As the price of gas gets higher, … our program becomes more advantageous to the consumer.”

Winn-Dixie’s Fuelperks! program is active across 44% of the company’s store base in 213 locations, including stores in the Jacksonville, Fla., Miami and New Orleans markets. Winn-Dixie is expected to expand its Fuelperks! program across the entire store base by the end of next year, Lynch said.

Meanwhile, Lynch also noted the Jacksonville-based grocer is augmenting its just-in-time meal solutions with ready-to-eat meals tailored to the tastes of the surrounding neighborhoods and increased merchandising of convenient-meal solutions.

Lynch told analysts that the market continues to be “very rational” in terms of passing any inflationary costs to consumers. Cost inflation was up 2.8% across the third quarter, he said, and retail inflation (the costs passed along to the consumer) was up 2.2%. Price increases across the meat category — which is a high-promotion category — are a little more difficult to pass along, Lynch said, explaining in part the 60-basis point difference between rising costs to the grocer and rising retail pricing.

Winn-Dixie on Monday posted net sales of $1.6 billion for the 12 weeks ended April 6, essentially even when compared with the same period in the prior fiscal year. Identical-store sales were down 0.5% for the third quarter, compared with the prior-year period.